from the pay-attention,-chicken-little dept

While there's been no limit of hand-wringing over the new net neutrality rules, much of this has been either hyberbole by giant ISPs that don't like having their anti-competitive pipe dreams quashed, or by folks who don't actually understand what the rules actually do. There are a number of smaller ISPs, partisans and tech execs that exist in the second camp, assuming in kneejerk fashion that the FCC's new rules saddle them with all manner of burdensome regulations. In reality, as we've noted several times, not much changes under the new rules -- provided you don't intend to engage in anti-competitive behavior.

Former Verizon regulatory lawyer turned FCC Commissioner Ajit Pai voted down the rules, and has been waging a bizarre, facts-optional assault on neutrality supporters like Netflix ever since. Last week Pai managed to drum up a little extra hysteria on this front by proclaiming that the new rules were crushing small ISPs with all manner of new costs. Pai trots out several small ISPs that, in filings to the FCC, take a page out of the AT&T pouting playbook and say they're freezing investment in broadband because the rules are just too damn onerous:

"KWISP President Kenneth Hohhof told Ars that his two-person company makes revenue of $250,000 to $300,000 per year, and he estimates that he’ll have to pay $20,000 in legal costs because he intends to hire a lawyer to review his business practices. Hohhof admits that he “pulled that [number] out of the air,” but given the hourly rates charged by telecom lawyers, he expects the bill to be substantial for such a small company.

...Another wireless ISP Pai described is SCS Broadband in rural Virginia, which serves 800 customers and “has already stopped investing in new rural areas because of the FCC’s decision, and it won’t resume until it can ‘determine if the additional cost in legal fees warrant such investments,’” Pai said. “And investors have already told SCS Broadband that ‘projects that were viable investments under the regime that existed before the Order will no longer provide the necessary returns to justify the investment.’"

Yes, like with any regulations, investors will need to do due diligence, and businesses need to occasionally consult attorneys to understand the market landscape in which they operate. Also, shockingly, lawyers do indeed tend to take extra advantage of people who can't be bothered to understand when their services are or aren't needed. And while it's clear the FCC could do a better job communicating the rules' impact, these problems aren't the fault of the rules themselves.

Rather amusingly, Ars Technica then proceeds to dissect most of these concerns point by point, suggesting that most of the small ISPs engaged in hysterics over the rules appear to not understand them in the slightest. As Ars notes, most of the onerous portions of Title II (rate regulation, local loop unbundling) aren't included in the rules, and most smaller ISPs are exempted from new transparency requirements. Indeed, most of the non-blocking, non-throttling, and "reasonable network management" requirements are the same, relatively-generous ones these ISPs lived under with the original net neutrality rules, which they didn't need lawyers to understand and comply with.

The bottom line: a lot of confusion and fear on the part of hysterical anti-Title II folks could be eliminated by actually reading the rules (pdf), instead of listening to incumbent ISP lawyers, former incumbent ISP lawyers like Ajit Pai, or execs like Mark Cuban. Again, many folks who actually run ISPs for a living (like Sonic.net CEO Dane Jasper) note it's only ISPs that engage in anti-competitive behavior that should worry. That's not hard to realize if you've paid attention to the FCC's recent, totally out of character, shift toward notably more consumer and competition-friendly telecom policies that are already benefiting consumers and companies alike.

Even the major ISPs that hate the idea of having their anti-competitive shenanigans policed have repeatedly and quietly admitted the rules don't impact their day-to-day business operations much. While their lawyers and lobbyists have been busy predicting business Armageddon, dozens of ISP execs have gone on record in recent months to admit the rules don't change much of anything for them operationally. And indeed, small ISPs that have bothered to pay attention to this bizarre new about-face at the FCC (like Joshua Montgomery of Wicked Broadband in Kansas) appear to understand this:

"If you're behaving in your customers' best interests and operating above the board, I don't think you have anything to be concerned about,” he said. “If you're advertising a $19 rate and then jacking people's bills up to $125 with fees and other things after six months and claiming some kind of long-term deal, yeah you're probably going to have trouble. [The FCC] made it very clear that their goal is to encourage competition, and I don't think they have their eyes on small players."

At the heart of the net neutrality opposition are very wealthy companies immeasurably angry that somebody is finally trying to stop them from aggressively cashing in on the lack of competition over the broadband last mile. At the periphery are many satellite opponents who just oppose the new rules because (certainly not without some valid historic justification) they believe all regulation is always bad, and you don't need to have an intelligent, nuanced debate on the merits of individual proposals because the fact that regulation is always, automatically bad is always true and la la la I can't hear you. The former have a pretty easy time riling up the latter, but you can go a long way toward avoiding this kind of confusion by actually reading and understanding the regulations you're busy claiming will destroy the business universe as we know it.

from the head-in-sand dept

Consumers have been clamoring for better cable TV pricing and more flexible channel options for the better part of the last decade, and for most of that time the broadcast and cable industry has been willfully -- almost gleefully -- ignoring them under the mistaken belief that the cable TV cash cow will live forever. With 2015 giving rise to a number of more flexible Internet video options, the conversation has heated up once again, leading to a very small number of companies (like Verizon) experimenting with modestly more flexible channel bundle packages where costly sports programming is broken out into its own tier.

However, the majority of cable TV executives remain with their heads planted squarely in the sand. When pressed on whether it would try to offer more consumer-friendly "skinny" channel bundles in response to consumer-driven industry trends, Time Warner Cable execs informed analysts recently that it would just be too confusing:

"There’s a lot of attraction in the press about skinny packages," echoed Dinesh C. Jain, chief operating officer of Time Warner Cable. “I think a lot of the times, customers don’t want to get bogged down in a lot of choices to make on those kinds of things. There’s a lot of value in our triple-play packaging right now and it’s a simpler sale."

Yes, you wouldn't want to confuse the consumer by offering them something more competitive than you do now. And when calculating "value," surely Time Warner Cable is including its excellent customer service, ranked worse than any other U.S. company in any industry? Time Warner Cable has been paying lip service to more flexible options since 2010 or before, yet they never seem to materialize. That's in part thanks to broadcasters, whose programming rates continue to sail skyward utterly untethered from reason. But cable companies aren't faultless; they raise rates wherever and whenever they can as well, whether that's for DVR rentals, extra fees just to pay your bill in person, or sneaky below the line charges to covertly drive up the advertised rate.

At the cable industry's Internet & Television Expo last week, cable executives again proclaimed they didn't see the need for more flexible, cost-conscious cable lineups, because customers already get way more value than they can possibly handle:

"People have always had choice in what they buy in their subscription package,” declared Charter Communications CEO Tom Rutledge. "The vast majority of customers tend to take the larger bundle, and the reason is, it’s a damn good value,” said Time Warner Cable CEO Rob Marcus after allowing that “More flexibility is better."

In other words, there's no need to offer greater choice or value because we're already really incredible at doing that. Except data across the board suggests that they aren't.

A Reuters/Ipsos poll released concurrently with these execs' comments found that 77% of U.S. adults say they'd prefer a la carte cable programming, a shift the industry has fought off for years by arguing it would kill niche channels (something that's happening anyway) and raise rates (something that's happening anyway). But it's not just a la carte the cable industry has been resistant to; it's any shift toward more compelling programming tiers. That same poll also found that 54% of consumers would like to be able to buy a core cable bundle that doesn't include ESPN, and 47% don't want cable news networks.

The cable and broadcast industry could work together to get out ahead of Internet video, but they're absolutely terrified of offering any products that would cannibalize their traditional cable TV subscriber bases. They're comforted by the fact that so many subscribers continue to pay an arm and a leg for bloated, expensive cable bundles, and believe that the giant pay TV fortress they've built will survive indefinitely. So like so many legacy industries, instead of meaningful, pre-emptive adaptation, the cable sector stands in the middle of the highway with a glassy eyed stare, confident in its resilience against the eighteen wheeler that bears down upon it.

from the this-might-get-interesting dept

You might recall that last October, Verizon tried its hand at getting into the media business with the launch of a tech blog by the name of Sugarstring. The bizarre foray into media didn't last long; editors quickly complained that Verizon was prohibiting them from talking about huge tech issues Verizon played a starring role in, ranging from net neutrality to domestic surveillance. After the media ridiculed the hell out of Verizon's ham-fisted disregard of editorial firewalls (or just common sense), the website was quietly shuttered, with the telco saying it was just a "pilot project" it was moving on from.

So what is Verizon's media plan 2.0 going to be? Apparently, it's a little something called AOL. Verizon this morning announced that the company would be buying AOL for around $4.4 billion, stating the acquisition would be supporting the telco's over the top video and Internet-of Things ambitions (read: they wanted AOL's ad empire):

"Verizon is a leader in mobile and OTT connected platforms, and the combination of Verizon and AOL creates a unique and scaled mobile and OTT media platform for creators, consumers and advertisers. The visions of Verizon and AOL are shared; the companies have existing successful partnerships, and we are excited to work with the team at Verizon to create the next generation of media through mobile and video."

Nobody on Earth flubbed the dial-up to broadband era transition quite as spectacularly as AOL did, so being acquired by a telecom operator ten years too late isn't without it's irony. Equally ironic is Verizon suddenly acquiring 2.2 million new dial-up subscribers at a time when it's desperately trying to back away from the fixed-line broadband business (how many DSL lines would $4.4 billion upgrade?). But AOL's a very different company these days, and the acquisition makes sense as a mobile advertising play, even if it just feels weird to see the two companies snuggle up in bed together.

Apparently, current AOL CEO Tim Armstrong will remain in command under the freshly-acquired AOL, which will operate as an independent Verizon subsidiary. There's no declaration of retained editorial independence anywhere, but that may not mean much. From a memo from Armstrong sent to all AOL employees this morning:

"The leadership at AOL is staying and I am staying – enthusiastically, and we made that part of the deal. We have the opportunity to build a unique and globally scaled media technology company with the scale and resources we need to make that happen. Verizon and AOL are very large partners today – in content, in ads, and in the technology. We know their team well and they know our team well. The cultures share very similar values and are both working on very similar ways to do good while doing well."

Do those "values" and "doing good" include propping up Verizon's role as one of the most vocal and obnoxious opponents to net neutrality on the Internet? Stay tuned. There's some chatter that Verizon may want to spin off or sell off the content companies, just using the remaining ad empire to fuel the telco's new wireless-focus Internet video subscription service expected to launch sometime later this year. If retained, you'd like to think Verizon will play it smart and not aggressively meddle in the daily dealings of websites like The Huffington Post, Engadget, or TechCrunch, but with the telco's generation-long history of aggressively bad ideas (most recently being a foray into undeletable super cookies), you just never know.

from the nah-nah-I-can't-hear-you dept

We've noted how AT&T and Verizon investors and executives have been terrified for some time that they would have to (gasp) compete on price as T-Mobile continues to disrupt the market with its consumer-friendly, faux-punk rock behavior. Ever since the AT&T deal was blocked by regulators, T-Mobile has been mercilessly (but entertainingly) mocking both companies, offering a bevy of promotions while eliminating a lot of "pain points" for consumers (like overage fees). It's working: T-Mobile's now signing up more subscribers each quarter than Sprint, AT&T or Verizon -- just by treating consumers well.

So far, outside of a few very time-limited promotions, Verizon's been unwilling to compete on price, insisting the company's high prices are justified by a "premium network experience." Verizon also recently tried to shoot down the appeal of T-Mobile's unlimited data offerings by insisting that nobody really wants unlimited data plans, they're just being driven by "gut feelings." With T-Mobile just having one of its most successful quarters ever, Verizon's increasingly under pressure to compete on price, yet the telco continues to proclaim it doesn't have to:

The company reported on Tuesday that it had lost 138,000 postpaid customers in the last three months. Francis Shammo, Verizon’s chief financial officer, apparently won't be missing customers who, he says, value price over quality. "If the customer who is just price-sensitive and does not care about the quality of the network—or is sufficient with just paying a lower price—that’s probably the customer we’re not going to be able to keep," he said in the company’s quarterly earnings call."

It shows you just what kind of competition Verizon's historically used to if the company honestly believes you have a choice of when you get to compete on price. And while the company is busy telling investors that it's not feeling any heat from T-Mobile, the growing, magenta-hued (TM) threat has Verizon simultaneously testing a number of new price promotions it hopes will help tip the subscriber scales back in its favor. Smelling blood, T-Mobile this week launched a new promotion that specifically takes aim at these "price sensitive" customers Verizon apparently doesn't want any more:

Of course Verizon's not entirely wrong. The company does come in first place pretty consistently in most customer service and network performance studies. Verizon's also well aware it enjoys an 80+% retail market share with AT&T, and an 85% market share of the special access (cell tower backhaul) market. The two companies also enjoy an estimated $171 billion in combined spectrum holdings, which certainly helps keep other competitors from market. Still, this belief that the company doesn't have to compete on price in the face of increased price competition seems like a pipe dream narrative they'll only be able to push for so long, especially if Sprint can manage to get out of its own way, fix its lagging network, and become a viable fourth wireless competitor.

from the smooth-move-exlax dept

It's no secret that ISP support reps will consistently tell you whatever you'd like to hear when trying to sell you on more expensive packages, even if the claims are miles from reality. Sometimes that's just a support rep going rogue to meet numbers and try to make a sale, and sometimes it's part of a consistent, scripted effort to mislead the consumer. Frost and Sullivan analyst Dan Rayburn says he ran into the latter recently when he called to renegotiate his FiOS triple play bundle rate with the telco, and was informed, repeatedly, that he needed to upgrade his speed from 50 Mbps to 75 Mbps if he wanted Netflix to stream properly.

That wasn't the brightest move on Verizon's part, since Rayburn covers the streaming video sector for a living. Rayburn was quick to highlight that Ookla data shows that the average bitrate delivered to a Verizon customer last month was around 3.5 Mbps. Even in a household full of streaming video fanatics, there's really not much that 75 Mbps will provide that 50 Mbps won't. And while Rayburn warns that uninformed users can easily fall into Verizon's trap, it should only take the average consumer about five minutes of Google use to avoid this pitfall.

Netflix's website informs users the company's standard definition streaming service eats about 1 GB of data per hour per stream of standard def video, and Netflix recommends roughly 3 Mbps for standard def content. High definition video meanwhile consumes around 3 GB per hour, per stream, with Netflix recommending 5 Mbps for HD video. Even if you're part of the tiny number of people with a 4K set looking to stream Ultra HD, you'll only need a connection of around 25 Mbps, according to Netflix. Of course this requires the average consumer to know what a gigabyte is, which is no safe bet.

Rayburn proceeds to document that this wasn't just a one-off situation, but that Verizon lied about his need for 75 Mbps to obtain "smoother" Netflix streaming numerous times:

"While some might want to chalk this us to an isolated incident, or an over zealous sales rep, that’s not the case at all. I called in three times and spoke to three different reps, plus one online and got the same pitch. Clearly this sales tactic is being driven by those higher up in the company and isn’t something a sales rep made up on their own. And two years ago, Verizon tried to pitch me the exact same story, promising better quality Netflix streaming if I upgraded my Internet package."

The biggest irony here, unmentioned by Rayburn, is that he's consistently been one of only a few analysts on Verizon's side during the company's recent interconnection scuffle with Netflix, blaming Netflix, not giant ISPs, for most of the congestion issues that magically started popping up over the last year or so as ISPs like Verizon started pushing Netflix for direct interconnection fees. In other words, Verizon not only tried to bullshit someone who spends their life discussing streaming issues, but it managed to annoy one of the company's few allies on the net neutrality and interconnection front. That's quite a double play.

from the funny-how-that-works dept

A little over a year ago, Level 3 was busy accusing Verizon of intentionally letting its peering points get congested in order to degrade Netflix streaming performance, by proxy forcing Netflix to pay Verizon for direct interconnection if it wanted to remedy the situation. According to arguments by Netflix, Level3 and Cogent, big ISPs like Verizon, Comcast and AT&T decided to move the net neutrality debate out to the edge of the network, obtaining their pound of flesh by eliminating settlement-free peering and demanding new charges just to access last mile customers.

To hear AT&T, Verizon, and Comcast tell it, the fight was all just a big misunderstanding, and what was occurring was just run of the mill peering disputes. Meanwhile, their army of fauxcademics, astroturfers, lobbyists, consultants and think tankers were busy telling anyone who'd listen that Netflix was trying to destroy the Internet.

But in a series of blog posts from last year, Level 3 content and media VP Mark Taylor continued to argue that there was a major anti-competitive cabal afoot, with only the biggest ISPs holding network performance (and their own users) for ransom in a quest for more revenue:

"All of the networks have ample capacity and congestion only occurs in a small number of locations, locations where networks interconnect with some last mile ISPs like Verizon. The cost of removing that congestion is absolutely trivial. It takes two parties to remove congestion at an interconnect point. I can confirm that Level 3 is not the party refusing to add that capacity. In fact, Level 3 has asked Verizon for a long time to add interconnection capacity and to deliver the traffic its customers are requesting from our customers, but Verizon refuses."

The problem, as we noted at the time, is that with peering arrangements entirely confidential, it was impossible for any researcher to fully prove incumbent ISPs were up to no good, even if the context of thirty years of anti-competitive behavior -- and scattered glimpses of limited data sets -- suggested the Netflix and Level 3 narrative might just be true. As such, the FCC announced it would begin collecting internal company data on interconnection to determine who, exactly, was telling the truth.

Even Cogent founder and CEO Dave Schaeffer, one of the most vocal executives in regards to these interconnection feuds, seems happy to have struck a no-payment deal with Verizon. According to Schaeffer, the FCC's new neutrality rules helped bring Verizon to the table, since Level 3 and Cogent had hinted they might complain to the FCC:

"Schaeffer told Ars that it did not have to pay Verizon to get the deal signed. "We have never paid for peering, and we continue to never pay for peering," he said today. Schaeffer said the FCC's rules "probably influenced the timing" of the agreement. He believes Verizon was also motivated to settle because Verizon's own EdgeCast content delivery network will benefit from distributing traffic through Cogent's network. But there is still work to do to make sure performance improves. "The degradation exists right now, the ports are massively oversubscribed and our initial fix is going to dramatically increase the connectivity," Schaeffer said. "The parties agreed to make sure this doesn’t become a problem going forward."

While the net neutrality rules don't technically take effect until June 13, apparently the mere threat of a regulator actually doing its job was enough to bring Verizon to the negotiations table. That's not to say there won't be problems going forward; there needs to be much more transparency surrounding interconnection agreements to protect consumers and competitors alike. Schaeffer is quick to highlight continued problems with AT&T, Time Warner Cable and CenturyLink (though he also points out that Comcast has suddenly become more amicable as well). Meanwhile, the FCC's neutrality rules obviously will need to withstand the full frontal legal assault of the entire broadband industry to remain useful.

Still, if you were paying attention, you might actually start to doubt the claims on several fronts that Title II will destroy the internet as we know it. Comcast's busy deploying two gigabit fiber to 18 million homes despite claiming Title II would demolish sector investment. Executives from Frontier, Cablevision, Sprint, Sonic and even Verizon have all publicly admitted Title II doesn't really hurt them in the slightest. And now Verizon, Level 3 and Cogent appear to have settled their differences thanks, in part, to the mere threat of actual FCC anti-competitive policing. Yeah, so far our new net neutrality rules seem like a real disaster for consumers and internet health alike.

from the our-sincerest-apologies dept

Having written about the FCC for most of my adult life, I've grown cynically accustomed to an agency that pays empty lip service to things like consumer welfare and the painful lack of broadband competition. It doesn't matter which party is in power; the FCC has, by and large, spent the lion's share of an entire generation ignoring last mile competitive problems and the resulting symptoms of that greater disease. When the agency could be bothered to actually address these issues, the policies were so tainted by the fear of upsetting campaign contributors (read: regulatory capture) they were often worse than doing nothing at all (see our $300 million broadband map that hallucinates speeds and ignores prices or 2010's loophole-filled net neutrality rules co-crafted by Verizon and Google).

Whether it was former FCC boss turned cable lobbyist Michael Powell's claims that massively deregulating the sector would magically result in telecom Utopia (tip: that didn't happen) or Julius Genachowski being utterly terrified of taking any meaningful stand whatsoever, the broadband industry has spent decades governed by an agency that, at its best, is too timid to do its job, and, at its worst, is an obvious revolving-door lap dog to an industry it's supposed to regulate.

So in 2013 when it was announced that a former lobbyist for both the wireless and cable industries would be the next FCC boss, the collective, audible sighs of disgust unsurprisingly rattled the Internet. I, like many others, believed we were bearing witness to a twisted culmination of decades of regulatory capture, a giant, living, breathing middle finger to a public hungry for a more consumer and innovator-friendly FCC. John Oliver even put Wheeler's name in lights when he infamously compared hiring the former cable lobbyist to employing a dingo as a babysitter:

Most people (with a few notable industry exceptions) believed Wheeler was the final nail in a grotesque, campaign-cash stuffed telecom coffin long under construction. We were painfully, ridiculously wrong.

In fact, if you read profiles on Wheeler, he's turned out to be a complete 180 from the thinking of a traditional revolving-door regulator, basing his decisions on all available information -- even if that data conflicts with previously-held beliefs (a unique alien indeed in 2015). And while it's true that massive grass roots advocacy helped shift Wheeler's thinking on issues like Title II, his embrace of issues like municipal broadband required little to no shoving, since the lion's share of the public had no idea the issue existed. One of the biggest reasons Wheeler's willing to stand up to the broadband industry? He's 69, and no longer biting his tongue and biding his time for the next cushy lobbyist or think tank gig. Perhaps we should make a rule that all future FCC bosses must be on the brink of retirement to avoid what we'll henceforth call Michael Powell syndrome.

Still, watching Wheeler fills me with cognitive dissonance, as if my frequently-disappointed brain isn't quite sure what to do with an FCC Commissioner capable of objective thought free of AT&T, Comcast and Verizon lobbyist detritus. As a sure sign of the looming apocalypse, last week I watched an FCC Commissioner issue a statement about protecting competition -- and actually mean it:

"Comcast and Time Warner Cable’s decision to end Comcast’s proposed acquisition of Time Warner Cable is in the best interests of consumers. The proposed transaction would have created a company with the most broadband and video subscribers in the nation alongside the ownership of significant programming interests. Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation especially given the growing importance of high-speed broadband to online video and innovative new services."

Though his tenure's unfinished, it may not be a stretch to say that a man most of us believed would be the epitome of revolving door dysfunction has proven to be one of the most consumer- and startup-friendly FCC Commissioners in the agency's history. Granted that may not be saying much; caring more about consumers than Martin, Powell and Genachowski is like getting an award for beating a handful of lobotomized ducklings at a hundred yard dash. And none of this is to classify Wheeler as a saint -- the agency's net neutrality rules have some very concerning loopholes and the FCC still refuses to talk much about pricing, whether that's the problems inherent in usage caps, unreliable meters, or sneaky below the line fees.

Still, it's a lesson learned in letting your mind run on cynicism autopilot, and it's a reminder that even our very broken, campaign-cashed soaked government can still occasionally manage to give birth to consumer-friendly policies. So in short, the tl;dr version is this: I apologize to you, Tom Wheeler, for believing you were a mindless cable shill. I was wrong.

Comcast/NBC, Fox and Disney/ESPN have been throwing a hissy fit in the week since the new options were announced, claiming that the new offerings violate existing contracts. It's not too surprising; breaking a channel like ESPN out of the core channel bundle immediately reduces ad impressions and overall marketing footprint, even if it's unfair for consumers to pay for incredibly-expensive content they have absolutely no interest in.

ESPN has now filed suit, issuing a summons (pdf) to Verizon (the actual complaint is still being redacted and hasn't been made public yet), stating that Verizon is in breach of contract. ESPN is requesting an immediate injunction and a financial penalty of $500,000. In a statement, ESPN argues that the channel really loves "innovation," except when it doesn't:

"A statement from the network explains that “ESPN is at the forefront of embracing innovative ways to deliver high-quality content and value to consumers on multiple platforms, but that must be done in compliance with our agreements. We simply ask that Verizon abide by the terms of our contracts."

Would that be the same contract that ESPN believes prevents innovative ways of delivering high-quality content? As 2015 becomes the year that Internet video finally starts to see some interesting but imperfect new options, ESPN's swimming upstream if it hopes to sue its way toward keeping cable permanently stuck in 2003. Consumers are increasingly making it clear that soaring programming rates simple aren't tenable, and they intend to cut the cord or flee to piracy if the cable industry wants to continue stumbling drunkenly down the current path.

If ESPN wants to get out ahead of it all, the company might want to focus on actually being at the forefront of developing "innovative ways to deliver high-quality content and value to consumers," in lieu of suing the limited number of cable companies actually trying to do this. Instead, like so many legacy giants, it will sue to try to stop the disruption, push even larger rate hikes on all of the remaining sports customers in the belief that the current cable TV cash cow will live forever, then act disoriented and stupid in a few years when the company finds itself behind the sports programming innovation eight ball.

from the the-worldwide-leader-in-crying dept

Thanks to loosening broadcaster licensing restrictions, 2015 is birthing a number of more interesting Internet video platforms, including Sony's Playstation Vue and Dish's Sling TV. The latter has glacially moved the industry needle toward marginally-more-flexible cable TV pricing options, offering users a $20 base TV package that can be complemented with a variety of additional $5 "channel packs." Users are tired of bi-annual rate hikes for bloated channel budgets, and these services are only just giving an early glimpse into the more flexible programming options that will be the TV industry norm within a decade.

Better yet, they're actually forcing some pay TV companies to adapt. Verizon, for example, last week announced that the company would be offering up a variety of new channel packs and add ons that bring a little more flexibility to the telco's traditionally rigid bundles. Mirroring the Sling TV approach, Verizon now says the company will be offering users the option to buy a base TV package starting at $55 a month, after which users can tack on extra channel packs for $10 each. Here's a better idea of what it looks like:

Verizon executives have traditionally been a little more progressively-minded about cord cutting than its industry counterparts (as in, actually occasionally admitting it exists), and this is a pretty clear play to not only cash in on cable companies' inflexibility, but try and prevent cord cutting. Since you usually can't see the true cost of a cable subscription until after you've gotten your bill (and seen all of the fees and obnoxious surcharges and caveats layered upon it), it's probably premature to call Verizon's effort revolutionary. But it's at least a start for an industry that has been swimming upstream and ignoring consumer demands for more than a decade.

"Media reports about Verizon’s new contemplated bundles describe packages that would not be authorized by our existing agreements. Among other issues, our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package."...ESPN’s statement — which complains specifically about having its networks relegated to an optional sports tier, instead of being included in the base package — suggests that Verizon never got an agreement from the programmer before it announced its plan. A person familiar with another programmer included in Verizon’s offering said that programmer hadn’t signed off on Verizon’s plan either. That person suggested that Verizon thought its agreements allowed it to try different offerings as a limited test."

The bloated cost of sports programming is one of the biggest reasons for soaring cable bills (as if either broadcasters and cable operators need reasons at this point), and Verizon's clearly firing a warning shot over the broadcasters' bow in regards to being able to shift these costly options into add-on tiers. That's great for consumers, but it obviously lessens ESPN's out-front consumer-facing power and overall reach. ESPN would love things to remain status quo indefinitely, but that's clearly not a sustainable position. The traditional cable bundle is a burning, Hindenburg-esque cash cow that's destined to crash, and the "worldwide leader in sports" would probably be better off accelerating its adaptation to the new paradigm.

Of course that's not going to happen. Customers who don't care about sports are first in line to cut the cord, and as those users refuse to subsidize everybody else, ESPN's first impulse will be to raise rates on customers that do watch sports in order to keep the current cash cow afloat. Simultaneously you can be sure that ESPN's lawyers are huddled around the conference table as we speak, contemplating a lawsuit they believe will magically freeze time indefinitely. But if Verizon doesn't help blow up the bundle somebody else will, whether that's Internet video (where ESPN at least still gets paid) or increased sporting event piracy.

Whatever ESPN's approach (and you'd hope it would be more progressively minded), this is definitely the opening salvo in a much broader -- and necessary -- cable and broadcast industry war over breaking up the traditional cable bundle.

from the these-are-not-the-droids-you're-looking-for dept

As we've made repeatedly clear, consumers really like the ease and simplicity of unlimited data plans. Whether that's on fixed-line or wireless networks, users don't really like having to guess if they'll make it in under the wire this month, and don't particularly enjoy being socked with $15 per gigabyte overages should they stream a few extra songs or watch a YouTube clip. However, when you enjoy the kind of regulatory and market power AT&T and Verizon do, you don't have to give a flying cellular damn what your consumers actually want.

As such, both companies decided to eliminate their unlimited data plans entirely a few years ago, replacing them with shared data plans laden with caps and steep overages. And while both companies did grandfather existing unlimited users, they made life as uncomfortable as possible for those users, whether it was by secretly throttling them after a few gigabytes of usage or restricting their access to specific apps unless they "upgraded" to a shared, metered plan. Meanwhile, competitors T-Mobile and Sprint have tried to differentiate themselves by continuing to offer unlimited data options.

Continuing the proud tradition of telling users what they want instead of giving them what they want, Verizon this week offered up an amusing blog post in which an analyst paints unlimited data plans as a public menace of the highest order. To hear analyst Jack Gold tell it, we should all agree that you can't have unlimited data plans, because they'll obliterate the network and leave us all weeping over our smart devices:

"The quality of connection is important to wireless users, and when connections become slow or disconnections occur due to overcrowding, users become disappointed. Let’s face it, if everyone had unlimited data and used it fully, the performance of the networks would suffer because of bandwidth restrictions and the “shared resource” nature of wireless. The bottom line is: users agree that degrading the networks is something that they don’t want to happen."

If I only had a nickel every time the congestion bogeyman was trotted out to defend anti-competitive pricing and policies. While spectrum is certainly a finite resource, Gold intentionally ignores the fact that offering unlimited data plans doesn't mean idiotically ignoring all network management and letting your network implode. While both Sprint and T-Mobile offer unlimited data, they still implement network management and throttling practices that ensure traffic loads remain relatively balanced and the consumer experience remains consistent.

In other words, most unlimited data plans aren't really unlimited anyway, or users have to pay a steep premium for the privilege of not having to worry about data thresholds. That's because AT&T and Verizon dominate 85% of the special access and cell tower backhaul market, resulting in Sprint and T-Mobile (and most everybody else) having to pay an arm and a leg too. It's all quite by design.

Gold knows this, but it's apparently much more fun to try and argue that unlimited data plans decimate the fabric of the space-time continuum and rip the very axle of the universe from its foundation. Disagree? Verizon's analyst proceeds to imply you're simply being overly emotional:

"So, while unlimited data may sound attractive, there is no practical effect of data limits on the majority of users. Understanding this should bring rationality to a discussion that is often held on a “gut feeling” level. Keeping adequate speed and performance while allowing all users to share the limited commodity we call wireless data is the fair way to deal with wireless connectivity. And ultimately, that is what is beneficial for wireless consumers."

Just so it's clear, it's "rational" to support Verizon's vision of internet pricing, in which you pay some of the highest prices among developed nations, but it's a "gut feeling" should you start to desire a better value plan. It's never quite clear to me who these telecom blog authors actually think they're speaking to. Surely the goal is to influence an overarching policy discussion, but all they generally wind up doing is having their brand mocked mercilessly by news outlets for being painfully out of touch with what consumers actually want.